Posts Tagged ‘US-China: clash of world systems’

China’s Ministry of Commerce stated on its website today that the US and China “made new progress” at a vice-minister-level call. Chinese TV spoke of “hopes raised in recent weeks of a significant breakthrough” in the trade negotiations.

In other words, with it’s use of subsidies in accordance with national priorities, its tight control over foreign direct investment and state control over the financial system and capital flows, all of which are in contradiction to the neo-liberal, Washington consensus, China maintains, essentially, a type of socialist system.

US President Donald Trump’s erratic unilateralism represents nothing less than abdication of global economic and political leadership. Trump’s withdrawal from the Paris climate agreement, his rejection of the Iran nuclear deal, his tariff war, and his frequent attacks on allies and embrace of adversaries have rapidly turned the United States into an unreliable partner in upholding the international order.

Like this:

“A secret plan to break up the West would also have the United States looking for new allies to replace the discarded ones. The most obvious would be Russia”

The most obvious would be China. Trump wants the factories back home which means in practice Chinese inward investment: China would invest directly into the USA rather than sell directly. This makes sense of Trump’s tariffs which would otherwise just be destructive. It’s true that the USA has a tradition of developing industry behind tariff barriers but that requires investment. At the end of the 19th century that came largely from Britain: now it can only come from China. At the same time, if the peace process with North Korea is successful China will come out in good light facilitating the above process. Trump has turned the world upside down. Can he put it together again?

The alliance between the United States and Western Europe has accomplished great things. It won two world wars in the first half of the 20th century. Then it expanded to include its former enemies and went on to win the Cold War, help spread democracy and build the highest living standards the world has ever known. President Trump is trying to destroy that alliance.

“The idea is not to keep foreign goods out, but to induce foreign companies to move production here.”,

I also assume that is the idea: otherwise it can only be pure madness. America’s rapid growth towards the end of the 19th century was also the result, not just of tariffs but of inward investment- in that case, from Britain who had decided to outsource the empire after the defeat of the Confederacy in the Civil War. Today, foreign investment provides the key to the reindustrialization of the USA and it is China in particular who can play that role. Prepare to hear Trump ringing out the slogan”The jobs are coming home!”

Since the anglo-saxon economic model is simply incapable of generating investment in the real economy Australia, like the UK and the USA, has become dependent on inward investment from China. It is now rebelling against this dependence, biting the hand that feeds it, along with it’s kith and kin in the USA and Britain in an alliance of losers. In this Oceanic dystopia “security concerns” trump economic interests. At the same time the notorious role of big money in running the political system suddenly becomes a problem when it’s a question of China rather than the homegrown oligarchy, or the Americans, buying politicians.

MELBOURNE–An influx of political donations from Chinese concerns has focused anxieties about the rising superpower’s growing influence here, while sparking calls for reform of the country’s lax political finance laws.

I think this is a credible outline of the Trump agenda: it ties in with the Brexit agenda and the emergence of an anti-China front which curiously replicates the Oceania of Orwell’s 1984. Essentially, it envisages a reconstruction policy without engagement with China. It is extremely questionable that such an Listian economic nationalist program can work in today’s conditions. It presupposes that capital goods and commodities can be imported for an ever devalued dollar. It presupposes that the USA still possesses the skills base and the national ethos for such a program, that it can accept sacrifice and a massive shift from consumer to capital spending. It presupposes that the US financial system can be adapted to productive capital investment and that the managerial, bureaucratic basis for a centrally directed economy can be put in place. And, above all, it presupposes that oligarchical interests can reconcile themselves to the dirigiste model which has hitherto been a taboo, that the political conditions for a latter-day New Deal exist. Is this, in the end, the last illusion of a USA which is rejecting a globalisation which it no longer controls?

This article gives an excellent overview of both China’s global strategy and systemic conflicts with the Western model. The authors correctly, in my view, identify the relationship of the financial system to the state as being at the heart of these systemic differences:

“To take one specific example, in Western economic thought, banks are seen as intermediaries between borrowers and lenders. Traditionally in Asia, however, banks are seen as instruments of state-directed growth and industrialization which take deposits and then use the savings through preferential allocation of credit to drive development in predetermined priority sectors of the economy.17 China’s People’s Bank, Ministry of Finance, and major policy banks, such as the China Development Bank and the State Export-Import Bank, have worked with their southern counterparts on how to become “responsible borrowers,” and how to identify and structure revenue and surplus-generating projects so that a stable supply of funds is available to repay loans.18 Chinese experiences on public financial and fiscal management are a core component in the curriculum of this government-to-government training.”

They also show great prescience in identifying the policy shift now crystalising out of Obama’s “pivot to Asia”:

“China, however, should be mindful that, just as it can hedge, so can the West and its likely Asian partners such as India and Japan. A reversion to an old- fashioned “balance-of-power” scenario would be unfortunate for all, especially if absent effective coordination mechanisms between the paramount powers.”

They could have added South America, South Africa, Australia and the UK as being drawn into an anti-China reaction or , at least, being strongly pressured in that direction.

Raising the spectre of a Chinese “security”threat is, of course, merely a pretext. Our hostility to China becomes China’s imagined hostility to us. The real issue is systemic: China’s financial system is subordinate to the state whereas our state is subordinate to the financial system. All this has been accentuated post-Brexit: at the same time as we shut out China we are directing more of our own resources to bailing out the financial sector.

Ahead of the upcoming presidential elections in the US, New York-based political analyst Caleb Maupin shares his vision on some of American foreign policy issues, such as relationship with China: he is convinced that no matter who wins, the President elect will be assigned the task of intensifying the confrontation with Beijing. And here is why.

“A purely military containment strategy worked against the USSR since the Soviet Union and its satellites formed an inward-looking economic autarchy, and Western Europe inevitably looked to the US and its massive economy as its only option for economic integration.

Not so in Asia. The PRC under Deng Xiaoping made the decision to eschew the autarchy model and embed China in the world and regional economy.”

That’s why “containment” is more about regime change in countries which engage too closely with China. There have been successes so far in Brazil, Argentina and the UK but these may end up being Pyrrhic victories: the USA offers no alternative developmental model to the enormously successful Chinese one.

During his recent trip to the US, Singapore Prime Minister Lee Hsien Loong, along with US President Barack Obama, made a joint pitch for the ratification of Trans-Pacific Partnership (TPP) trade agreement. However, the hope that the TTP would form the foundation of a robust and prosperous East Asian security regime centered on economic integration and positive US engagement is fading as China has chosen to react to The Hague ruling by unilaterally redefining its role in East Asia in opposition to the security and economic regime the US is seeking to reinforce.